Financial leverage is best measured by which of the following ratios?
A)The debt to equity ratio.
B)The return on equity ratio.
C)The times interest earned ratio.
D)The return on assets ratio.

Question

Quizplus · Accepted Answer

Financial leverage refers to a company's use of debt to finance its operations, and the debt to equity ratio is the best measure of this as it compares the amount of debt to the amount of equity a company has. A high debt to equity ratio indicates that a company is relying heavily on debt to finance its operations, which increases its financial leverage. The other ratios listed do not specifically measure financial leverage.

Financial Leverage Is Best Measured by Which of the Following